Recovery, with a changed mix

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Economic growth has weighed in at a five-quarter high in the quarter ended December.

The Central Statistical Office (CSO) released the gross domestic product (GDP) data for Q3 fiscal 2018 and second advance estimates for full fiscal 2018 on February 28, 2018. To recall, the CSO had also released revised GDP estimates of fiscal 2017 on January 31, 2018, and in which some of the sectoral growth numbers had undergone substantial revision.

Quarterly growth trend

Real GDP growth continued the upward trend and jumped to a five-quarter high of 7.2% in Q3 from 6.5% in Q2, suggesting the economy was steadily recovering from the twin shocks of demonetisation and a bumpy transition to the Goods and Services Tax (GST) regime. The jump was largely on the back of fixed investments, which grew 12% on-year, almost double the pace of 6.9% in Q2. Private consumption growth, on the other hand, slowed to 5.6% from 6.6%. Government consumption supported the overall consumption by growing at 6.1%, up from 2.9% in Q2.

The external sector was a big drag on GDP with imports rising at 8.7% compared with a muted 2.5% growth in exports in Q3.

On the supply side, gross value added (GVA) growth improved to 6.7% in Q3 from 6.2% in Q2, with a broad-based improvement in all sectors – agriculture (to 4.1% from 2.7%), industry (to 6.8% from 5.9%) and services (to 7.7% from 7.1%). Improvement in industrial growth in Q3 over Q2 was supported by a pick-up in manufacturing growth (to 8.1% from 6.9%) and a sharp upward movement in construction activity (to 6.8% from 2.8%). However, mining growth at -0.1% was a drag.